Luxury Coach & Transportation

March 2019

Magazine for the professional limousine, charter and tour industry.

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2018 LCT-NL A EAST SHOW: SAFET Y & INSURANCE PHOTO: GETTYIMAGE.COM/DNY59 A TLANTIC CITY, N.J. — As higher claims and costs wrack the insurance industry, opera- tors need to stay more informed about ways to lower their rates. A Nov. 5 education session at LCT East covered the big picture of commer- cial auto insurance to help operators choose insurance partners wisely. Two familiar industry experts of- fered an insider's guide to sound fleet insurance practices: Matt Mushorn, Vice President of Limo Underwriting at Lancer Insurance and a product man- ager for its car rental and van pool divi- sions; and Michelle Wiltgen, assistant vice president for National Interstate Insurance Company. State Of Insurance Industry e industry has seen a lack of under- writing profit for the last seven years, Mushorn said. Over the past decade, the frequency and severity of claims have in- creased, driven by medical costs, litiga- tion costs, injuries, and strong plaintiffs. "Insurers are either raising rates or pull- ing out of markets altogether," he said. At Lancer, closed claims over the last three-year bucket are up 25%, not only from the prior three years but the three years before that, Mushorn explained. "ere are more claims and they're costing more. We're seeing a lot more injuries, and injuries generally are followed by lawsuits. ey're up 33% since 2009, which would be over a 4% increase a year." As the economy resurges, the indus- try is seeing a collectively higher loss ratio, leading to higher premium rate increases in the last few years expected to continue into 2019. e loss ratio is the ratio of total losses incurred (paid and reserved) in claims plus adjust- ment expenses divided by the total premiums earned. Conversely, insurers that consistently experience high loss ratios may be in bad financial health. "It's important you work with insur- ance companies that know what you do and brokers who know what you do," Wiltgen said. "You should be part- nering with specialists." Showing a chart, Wiltgen explained how a loss ratio above the 100 mark hits insurers hard. "What that means being over 100 is for every dollar an in- surance company takes in, the amount they pay out is the deficit. So if you look at 2018, it's 114 combined, which means the insurance companies took in a dollar but paid out $1.14 in claims and expenses. So that is not good for insur- ance long-term." Insurance companies don't know if they've made money on your business for at least three to five years after the policy year ends, Wiltgen explained. "And that's kind of crazy if you think about it. We don't know that until those claims get settled, and the lawsuits are closed, and we move on. So there is defi- nitely a lag in the numbers, but lawsuits are costly and injuries are more costly." More Factors Adding to the pressure is the increase in overall number of miles driven with more vehicles on the road. at leads to more accidents and claims, some of which can involve multiple parties, which lead to even bigger claims. Some settlements can result in what are called "nuclear verdicts" resulting in damage awards in the tens or hun- dreds of millions. Meanwhile, vehicles cost more because of sophisticated technology that's more expensive to repair. And a shortage of qualified drivers may lead some companies to use less capable or higher risk drivers in a pinch. en there is distracted driving, with onboard screens and personal electronic devices always tempting drivers to take their eyes off the road. Too many drivers are looking down at phones and not paying attention. "You have to be careful," Wiltgen said. "We know there's a driver short- age, but you really need to think if you want that person behind the wheel because it's your liability. "You're transporting bodies and mil- lions of lives are in your hands every day," she added. "So it behooves you to make sure the people you have as insurance brokers know what you do for a living and understand what busi- ness you're in because they're the ones handling claims." She also advised knowing the differ- ence between a broker and an agent, which relates to whom they represent. An agent represents one or more insur- ance companies, and acts as an exten- 3 4 WWW.LCTMAG.COM LUXURY COACH & TRANSPORTATION MARCH 2019 Industry insurance experts Matt Mushorn and Michelle Wiltgen advised operators on cost- saving and safety-promoting best practices. Balancing Your Risks Rates & In this pricier insurance market, operators need to do more homework to find the best premiums and deductibles. By Martin Romjue, LCT editor

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